Atty. Rami Hourani
- The Philippines is organized in a way that makes it difficult for the government to undertake large projects.
- The Private sector was typically limited to roles that were purely commercial and could only participate in government projects as a bidder.
- The Public-Private Partnership (PPP) Law framework now allows businessmen to undertake projects that previously could have only been done with government.
- The PPP Law framework makes it possible for private companies to bridge the gaps in government services and at the same time be secure in their investment.
A common refrain among Filipinos is that the bureaucracy of the Philippine government is complicated and slow towards progress. What Filipinos are quick to forget about though is that Government Officials/Employees are citizens just like you and me. They also deal with the lack of infrastructure and lapses in the public service just like everyone else does. This means that they know that there may be inefficiencies.
This is because of many things. If I had to break it down to its most basic problem for the benefit of laypersons among us. Our government’s organizational units are both too big and too small at the same time. Allow me to explain. Let’s take for example everyone’s favorite topic: traffic. In Cebu City & Mandaue City, anything that one does with regard traffic will be affected by the other. Neither has the authority to create a four lane freeway that could cut across both and ease traffic. In broad strokes, Cebu Province’s authority stops at the cities. So, on the local level, there doesn’t appear to be an organizational unit that can address the problem. We see in this way that the organizational units are too small.
On the other end of the spectrum, we have the national government which has broad authority to create such projects. However, in order to do this, you need to get the attention of Congress. This means that a congressman from Tawi-tawi may need to vote on a project that will be undertaken in a province that he has never been to. You will understand if it is difficult to drum up support for these kinds of legislation. We see in this way that the largest organizational unit in the Philippines is too big. Let’s leave that thought there though and talk about what we can do about it.
The most basic formulation of businesses is the sale of goods or services though. The advent of the modern corporation though has exceeded this archaic definition. In the developed world, these corporations are able of controlling the flow of information from one country to another. In the Philippines, a corporation can carve out a section of skyline and make it resemble a city block of New York or Singapore.
It’s usually very clear though where these privately managed areas stop. The roads begin to crack. The layout of roads is a bit more haphazard. There isn’t a garbage bin in sight for at least a few kilometres. You don’t need a sign to tell you that you’ve entered a location that does not have a large corporation watching over it. At this point though, I’ll take the opportunity to say I don’t blame the government, I think it will take a very robust generation of public servants to bring the change people want within the constraints of the current political system.
Every business/entrepreneurship student on the planet is taught that they should strive to fulfill needs. If this is the standard that we apply, what need could be greater than that of a whole government? This is not some clever inference. There are currently projects in the Philippines that are worth almost a billion dollars and several that are worth hundreds of millions of dollars.
These are undertaken through something called a “Public-Private Partnership” or PPP for short. These are solemn agreements entered into by the Philippine Government with investors for providing something that furthers the public good. In order to really spell out the breadth of this branch of law it covers “power plants, highways, ports, airports, canals, dams, hydropower projects, water supply, irrigation, telecommunications, railroads and railways, transport systems, land reclamation projects, industrial estates or townships, housing, government buildings, tourism projects, markets, slaughterhouses, warehouses, solid waste management, information technology networks and database infrastructure, education and health facilities, sewerage, drainage, dredging, and other infrastructure and development projects as may be authorized by” the law.
A project proponent could propose the aforementioned 4-lane highway to all the concerned LGUs and ink an agreement with them that they would all have to abide by.
The immediate question that this conversation prompts though is how the private interest’s needs are served by entering into these arrangements. There are three important ways the law protects you: First, it protects your information, Second, it protects you from changes in policy, and Third, it protects your flexibility.
The way it protects your information is that the entire process of submitting an unsolicited proposal is constructed in such a way that it protects the information furnished to the government. Obtaining the information to tender a proposal is a costly affair. Depending on the complexity of the project, what could be required is anywhere from a team of two specialists or a whole team of consultants and working in close concert with a law firm. Simplifying greatly, the process grants to the first mover what is called “Original Proponent” or OP status which means that other persons seeking to take the project from the OP must make offers without knowing what terms the OP initially offered. The OP also has the right to match the terms of competing proposals.
These days you don’t have to look far for an example of a businessman who ran afoul of the government. The example of ABS-CBN is front and center in the minds of businessmen who enter into arrangements with the Philippine Government. The important difference between a PPP contract and a franchise is their treatment in the law. A contract is a right, a franchise is a privilege. Ending a contract means going to court, ending a franchise means pulling out a pen. Simply put, a contract is much harder to annul than a franchise. If the fact that I put the word “court” in this paragraph at all troubles you even that can be negotiated in a PPP contract. (You can “replace” the jurisdiction of the courts with that of an arbitral tribunal.)
As opposed to simple bidding, where the terms of an project are determined entirely by the government a PPP contract is not as one sided. This is because the proponent and the government have to come to a mutual understanding of what aspects of the project’s operations matter. In the case of unsolicited projects, or projects where the idea for the project came from the proponent, the proponent is the one that may have the most influence over what the parameters of the project and its operations will be.
I usually end my articles with “I hope you never need any of my advice!” but for this one I’ll end differently. If you are an investor, I hope you decide to invest in my country!
Atty. Hourani practices law in Cebu City. If you would like to set an appointment with him, you may reach him here.